Evidencing Consumer Duty and the Importance of Data

Following an industry-wide countdown, the Consumer Duty is here, and it’s here to stay. Compliance with the new regulations sets a new expectation for the sector. A key element of the duty is data and gathering, monitoring, and acting on this source consistently across the client lifecycle has never been so crucial. So, where should wealth management firms start? 

Of course, huge data repositories in themselves are not the aim. In the much-quoted words of Carly Fiorina, former CEO of Hewlett Packard, “The goal is to turn data into information, and information into insight” (Infragistics). And herein lies the crux, the FCA would like firms to prioritise data and Management Information (MI) to ensure they are meeting client outcomes, provide value consistently across all segments and act to prevent ‘foreseeable harm’. This requires consistent reporting and mining of information, but the accuracy of that data is fundamental to achieving an accurate view. Data only harnesses invaluable insight if it is clean, organised and up to date.  

Robert Roome, Chief Strategy Officer, Wealth Dynamix, commented, “A lot of firms are not 100% confident they can gather and report on high-quality data. The only thing worse than failing to monitor and report, is, perhaps, reporting inaccurate data and therefore taking the wrong actions. Firms who focus on good data governance, investing in strong data platforms to manage their client data efficiently with all the conformance and quality checks built in will make massive strides towards meeting the new Consumer Duty.”  

Adopting a digital-first mindset  

The FCA has declared its commitment to its digital innovation and in 2021, pledged a £120m investment in its own data strategy ‘for the next 3 years’ (FCA). Setting out their ‘vision for the use of data and analytics at the FCA’ in their 2022 Data strategy update (FCA), they aim to not only ‘set a new standard’ but to ‘become a more innovative, assertive and adaptive regulator’ (FCA).  

Given the digital trajectory of the sector, it is essential that wealth management and DFM firms follow suit to get their own houses in order, and quickly, given the ramifications of data inconsistencies or flaws. Perhaps even more pertinently to the Consumer Duty, within the FCA’s ‘one month to go’ guidance (FCA), they asked firms to consider 10 questions in particular, data, MI and an ability to report, analyse and test was intrinsic to all. Firms which have failed to invest in optimal technologies to allow for accurate data capture and consistent reporting to shield their clients from undue risk are at a critical point in their evolution.  

A digital-first mindset will assist wealth managers and marketers as they prioritise what data is important and valuable, in turn raising the bar for KYC and the client experience. In this way, firms can create a feedback loop based on client data which identifies emerging risks, trends or opportunities and allows FAs to act swiftly in response or senior management to take action. This feedback loop is integral to the Consumer Principle, The Four Outcomes, and the Cross-Cutting Rules, which have been designed to provide added protection for the customer, build trust in the sector and push financial institutions to prove the value of their proposition. 

Gathering, monitoring, and actioning your data 

If you’re still collating data in different silos across front, middle, and back office, a more cohesive approach is the way forward. A client lifecycle management (CLM) solution could confer many advantages when it comes to meeting the new Duty and harnessing efficiencies. By assuring a quality company-wide data source and embedding compliance into the client lifecycle, from prospecting through to onboarding and account management, a superior and fully compliant level of service can be achieved.